FinMin to scrutinise VAT credit claims

HIMALAYAN NEWS SERVICE

KATHMANDU: The recent increase in claims by business firms for Value Added Tax (VAT) credit has compelled the Finance Ministry to investigate the issue.

VAT refund claims have increased but there has been no change in VAT

debit figures, said finance secretary Krishna Hari Baskota at a programme organised on Tuesday.

“The government should maintain a strict vigil to control VAT fraud.” The state has to refund the VAT amount to businesses if their claim of VAT credit surpasses the amount of VAT debit, said director general at the Inland Revenue Department Tanka Mani Sharma, adding that the department will study the increasing trend of claims for VAT credit.

An increase in VAT credit is not bad in itself, a source at Finance Ministry said. “However, chances of missing-trader-fraud with others can’t be avoided when credit claims increase.”

“Generally, VAT credit amount was at around Rs 8-9 billion but has increased to around Rs 10 billion of late,” the Finance Ministry official said, adding that the Inland Revenue Department should start immediate monitoring of taxpayers in such a situation.

Firstly, the department should dig out the spectral status and identify the particular sector whose claims has increased, he said. “The department, then, should put listed taxpayers from the concerned sector under its scanner to control possible VAT fraud.”

The department’s vigilance is a must in a country like Nepal where more than 30 per cent VAT-registered firms are found to be non-filers though the claim of VAT refund is not negative at all, he added.

Normally, an increase in VAT credit indicates better economic performance, he said. “Increase in capital investment, rise in the value of the dollar, increase in import and consumption, and other reasons play a role in the increase of VAT credit.”

Department should constantly check the possibility of fraud since Nepal has already witnessed a VAT scam where the Inland Revenue Department had brought 518 firms — including big business firms — under its scanner and found them to be guilty, he added.